Assessing That Urban Outfitters Turnaround

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Urban Outfitters Inc. (NASDAQ: URBN) is one retailer where the stall might be regaining some momentum. That is at least what the after-hours reaction has shown after the earnings report this evening contains some upside on the bottom-line and a small miss on the top-line.

The specialty apparel retail outlet owner reported earnings of $0.23 per share versus the $0.20 per share estimate from Thomson Reuters. Revenues rose by more than 8.6% on a year over basis to $568.9 million. But Thomson Reuters was calling for revenues of more than $579 million.

It was the Urban Outfitters brand itself that led the sales as same-store sales there gained 6% and the direct-to-consumer sales rose 15% versus only 2% growth on the wholesale level. Despite the market treating this as a turnaround, the gross profit rate was down 131 basis points and the inventories rose by 13%. Selling, general and administrative expenses (SG&A) rose by 62 basis points.

Shares closed up 2.1% at $26.16 with a strong tape on the stock market today, but the after-hours reaction has shares up about 7% at $28.09 against a 52-week range of $21.47 to $33.90.

Today’s earnings report does not look or feel like a solid turnaround is coming on after the growth stalled significantly, but the market is treating it as “good enough” so far.